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Steven Pearlstein Informs Us of a Corporate-Led Coup

In the wake of the news about the expectations that the poverty rate rose in 2011 to pre-Great Society levels, I have to second Dean Baker’s story about the plans by the corporate elite to exacerbate that problem even more. Steven Pearlstein at the Washington Post wrote approvingly over the weekend of an effort by the nation’s leading CEOs to install a deficit regime that would demolish the social safety net.

Some grown-ups who have been noticeably absent from this conversation have been the heads of the country’s major corporations, who talk a good game about deficit reduction but haven’t invested the time, money and political capital necessary to jolt the political system from its dysfunctional equilibrium.

That’s about to change. Last week, the first battalion of CEOs showed up in Washington, reporting for duty […]

During the past year, there have been quiet meetings put together by chief executives such as (Honeywell’s David) Cote, Aetna’s Mark Bertolini and JPMorgan’s Jamie Dimon, and Senators Mark Warner (D) and Saxby Chambliss (R), the ringleaders of the bipartisan Gang of Six. Nudging it along and pulling it all together has been Maya MacGuineas, who for a decade has been sounding the deficit alarm from the Committee for a Responsible Federal Budget.

What Pearlstein is lauding is the “Fix the Debt” organization, the new rock supergroup of deficit scolds which I mentioned last week. I see them as an undemocratic effort to force unpopular decisions on the public through unaccountable structures. Pearlstein sees this as a virtue. He also mentions that the group plans to raise $50-$100 million in the next two months to push their deficit plan in Washington.

Dean Baker has already taken apart the idea that we should be thrilled that corporate titans are working to ensure a deficit deal regardless of the outcome of the 2012 election, which in an accountable world would help decide these matters. The goal is to put something together approaching the Bowles-Simpson recommendations, which would reduce Social Security and Medicare benefits in exchange for some token changes to the tax system. It’s beyond clear that any such revenue increases will get unwound in subsequent years by loopholes and tax credits, that the very politicians clamoring for a “balanced” deal will work hard to protect.

As a member of the “Gang of Six,” Senator Mike Crapo of Idaho has emerged as something of a hero among advocates of bipartisanship, one of three conservative Republicans working with three Democrats to cut the deficit by closing loopholes that allow businesses and households to avoid paying taxes.

Yet earlier this year, the senator made sure that a $3 billion loophole — protecting “black liquor,” an alcoholic sludge used as fuel in timber mills and factories — remained open in the negotiations over the highway bill that President Obama signed this month. Many budget experts criticize the loophole as a tax dodge because it allows the sludge to qualify for an energy subsidy created to wean the country off imported oil for vehicles, which black liquor does not do.

The black liquor loophole is particularly egregious. Paper and timber mills have been using this by-product for decades to fuel their factories, but now they can have it qualify as an alternative fuel product. It’s a pure subsidy for these businesses for doing nothing. And Crapo, who scolds the country for fiscal profligacy at every opportunity, championed the industry keeping the tax break. More tax breaks will follow. And whatever benefit from tax changes will slowly get squeezed out. We’ll only get left with the reduced safety net benefits. And that will suit the CEOs leading this coup just fine.

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David Dayen

David Dayen